The prime minister yesterday criticized bosses who take
high pay when their company’s share price hasn’t risen. His
spokesman, Steve Field, refused to comment yesterday on whether
RBS Chief Executive Officer Stephen Hester is entitled to a
bonus, given that the company’s share price has fallen by almost
half over the past year.

Field said the issue of pay at RBS is being handled by U.K.
Financial Investments Ltd., or UKFI, the government’s arm’s-
length manager of its bank holdings, which does not get involved
in “individual decisions at RBS.”

“No decision has been taken on any of these things,”
Field said.

Hester was paid 3.27 million pounds ($5.05 million) in
salary, bonus and benefits for 2010, while Finance Director
Bruce Van Saun was paid 2.3 million pounds. Hester could be paid
4.2 million pounds in shares if he meets targets set in an
incentive plan by next year. Under the same plan, Van Saun could
be paid 2.5 million pounds, according to RBS’s annual report.

The Financial Times reported yesterday that John Hourican,
CEO of RBS’s investment bank, stands to receive a special bonus
of more than 4 million pounds in April, under an agreement made
in 2009. The Unite union, which represents the bank’s junior
staff, described that as “astonishing.”

Genachowski made the remarks at a speech in Washington
yesterday. Proposed rules, to be sent to fellow commissioners
yesterday, include creating a national database listing
households eligible for the subsidy, Genachowski said. The
changes require a majority vote from the agency.

The FCC said in March that “in many cases multiple”
wireless companies seek reimbursement for service to the same
residence. The program that provides the payments climbed to
$1.3 billion in 2010 from $667 million in 2000, according to the
agency.

The low-income assistance is part of an $8 billion program
that pays providers to extend service to rural areas, schools
and libraries. The program operates under a 1996 law designed to
make quality telecommunications service available to all,
according to the FCC.

The fund’s growth has led federal officials to increase
fees that consumers pay to support it.

Ethics Code Requires Economics Authors Disclose Financial Ties

The American Economic Association, the world’s largest
organization for economists, has said authors submitting papers
to its publications must disclose any potential conflicts of
interest. The Nashville, Tennessee-based organization also urged
its 18,000 members, about half of whom work in academia, and
other economists to apply the standard to all media.

Criticism of the profession came to the fore after the 2010
release of “Inside Job,” an Academy Award-winning documentary
about the financial crisis that features economists being
interviewed about their links to the financial industry.

The AEA guidelines, adopted by the group’s executive
committee on Jan. 5, state that authors must disclose the source
of funding, if any, for their research, and whether they have
received financial support from an interested party totaling at
least $10,000 during the past three years.

Prime Minister Viktor Orban Jan. 8 abandoned previous
objections to an IMF bailout, indicating his government was open
to “any kind” of credit line to prop up financing. The
European Union and the IMF last month suspended aid talks after
Orban pressed ahead with legislation that the central bank said
violates its independence.

The acceptance of a standby IMF loan may restore economic-
policy credibility in the medium-term, Bajnai said.

India ’s government will soon ratify a November cabinet
decision to allow foreign companies to fully control retail
chains that sell a single brand of products, two officials with
direct knowledge of the matter said, asking not to be identified
before a public announcement.

Compliance Action

Newedge USA Fined $700,000 by CFTC for Trading Record Errors

Newedge USA LLC, the broker with the most U.S. segregated
customer funds, will pay $700,000 to resolve regulatory claims
that the firm submitted flawed trader reports and violated an
earlier order to improve accuracy.

Newedge turned in large-trader reports with eight types of
errors from March through July of last year including
overstatements and understatements of positions and open
interest, the Commodity Futures Trading Commission said in an
order released in Washington yesterday. The regulator also found
that the brokerage, a unit of Paris-based Newedge Group SA,
failed to comply with a Feb. 7 order to improve its reporting.

The enforcement action “should send a message to the
industry” about adhering to prior commission orders, CFTC
Enforcement Director David Meister said in a statement.
Newedge’s reporting “has greatly improved” since July, the
CFTC said.

The company, which didn’t admit or deny the allegations,
regrets that “certain reports required corrections” during the
firm’s re-engineering efforts, Kevin Russell, a spokesman for
Newedge, said in an e-mail statement. The company “has elected
to settle with the CFTC because of these lapses,” Russell said.

Newedge ranked first among futures brokers with $20.8
billion in U.S. customers’ segregated funds on Oct. 31,
according to CFTC data.

Hungary’s Malev Airline Ordered by EU to Repay State Support

Malev Zrt. (MALEV), Hungary’s unprofitable state-owned airline, was
ordered by the European Union to repay loans and guarantees to
the crisis-hit nation’s government.

The European Commission said Hungary gave Malev financial
help from 2007 to 2010 when the company wouldn’t have got
financing on similar terms “nor possibly any financing at all”
from any private investor “given its consistently difficult
financial situation.”

Malev may have to pay back “tens of billions of forint”
because of the EU probe, Tamas Fellegi, who was then development
minister, said on Dec. 5. Hungary’s government “respects” the
commission’s decision and wants to ensure Malev’s continued
operation, the development ministry said in an e-mailed
statement yesterday. The cabinet will discuss the EU repayment
decision on Jan. 16.

Hungary is seeking a buyer for Malev and is in “advanced”
talks with possible investors in the airline, which is still
relying on government aid.

Administrators at MF Global Holdings Ltd (MFGLQ).’s U.K. unit said
they have threatened to sue large financial institutions who
were unwilling to release money they held for the failed
broker’s clients.

Some companies “have a number of positions across the
group and they are generally hesitant” to hand over
unsegregated funds worth a total of more than 1 billion pounds
($1.5 billion), Richard Heis, the lead administrator at KPMG
LLP, told MF Global clients and creditors at a meeting in London
today.

JPMorgan Chase & Co., Bank of New York Mellon Corp.,
Citigroup Inc. and LCH.Clearnet Group Ltd. were among the
depository institutions holding cash and assets for MF Global
customers, according to documents released by KPMG.

MF Global Holdings Ltd., based in New York, was the fifth-
largest financial company to file for bankruptcy when it sought
protection on Oct. 31 after making losing bets on European
sovereign debt. KPMG was appointed to supervise the special
administration of the broker’s London unit.

MF Global Holding Ltd.’s (MF) U.K. customers demanded their
money back at the creditors’ meeting as administrators KPMG LLP
said they racked up 17.5 million pounds ($27 million) in fees
since the broker’s collapse without returning anything to
clients.

Customers asked KPMG, which was appointed to wind up MF
Global’s U.K. unit on Oct. 31, why the process was taking so
long and what would happen to money that wasn’t in protected, or
segregated, accounts. Others expressed surprise when KPMG said
clients with unsegregated accounts, which weren’t held
separately from the broker’s own money, would be treated as
unsecured claims alongside other creditors.

The issue of unsegregated customer funds sparked contention
at the first meeting between KPMG and the broker’s U.K. clients
and creditors yesterday, unlike in the U.S., where attention is
focused on locating some $1.2 billion missing from customer
accounts. Bankruptcy trustees for New York-based MF Global
Holdings Ltd. have scheduled a creditors meeting for Jan. 26.

“The rule will force market participants to forgo
efficient trading strategies, impair their ability to hedge
against risks, and potentially require them to restructure their
businesses,” the groups said in the filing. “These costs will
mount now absent a stay, and they would be impossible to recoup
if the rule is invalidated -- as it likely will be.”

The groups, in one of the financial industry’s highest-
profile efforts to weaken last year’s Dodd-Frank law, filed
lawsuits challenging the rule in two federal courts in
Washington last month.

The CFTC, on Jan. 4, asked the appeals court to dismiss the
challenge claiming it doesn’t have jurisdiction to consider the
lawsuit. The agency said that the district court must first
consider a challenge to the rule.

For more, click here.

Ex-Refco Lawyer Collins’s Conviction Thrown Out on Appeal

The conviction of Joseph Collins, Refco Inc. (RFXCQ)’s former
outside lawyer, was reversed by an appeals court that found the
trial judge improperly instructed a juror outside the presence
of his lawyers.

Collins, convicted in 2009 of aiding Refco’s former chief
executive officer Phillip Bennett and other executives defraud
investors of $2.4 billion, is entitled to a new trial, a three-
judge panel of the New York-based federal appeals court said in
a ruling yesterday.

During deliberations in the case, jurors told the judge
that there had been threats of violence in the jury room.

“After this long fight, we are very gratified by the Court
of Appeals’ decision,” William Schwartz, a lawyer for Collins,
said in an e-mailed statement. Ellen Davis, a spokeswoman for
the U.S. Attorney in Manhattan, declined to comment on the
ruling.

Collins was sentenced to seven years in prison.

The case is U.S. v. Collins, 07-cr-1170, U.S. District
Court, Southern District of New York (Manhattan).

For more, click here.

Comings and Goings

Hildebrand Quits SNB After Struggle to Restore Credibility

Philipp Hildebrand resigned as head of the Swiss central
bank four days after pledging to fight for his job in a furor
over his wife’s currency trading.

Swiss National Bank Vice President Thomas Jordan, 48, was
appointed interim chairman after the surprise announcement at a
news conference in Bern that Hildebrand called yesterday.

Hildebrand, 48, said he came to the conclusion that it is
not possible to “deliver definite proof” that his wife
requested the currency transaction without his knowledge.

The episode called into question Hildebrand’s credibility
as guardian of the Swiss franc, and pressure on him to resign
increased following media reports that his family may have
profited from inside information.

Economists at VTB Capital and Swissquote Bank SA said his
departure will leave investors testing the franc cap.

Hildebrand’s departure from the SNB’s three-member board
deprives Switzerland of a policy maker who managed to stem the
franc’s rally to records against the dollar and the euro, which
had threatened to derail the economy.

Separately, Hildebrand resigned yesterday from his role as
vice chairman of the Financial Stability Board.